The best Australian REITs to invest in this month

Analysts think these property companies are top buys.

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As well as being able to invest in companies like Telstra Group Ltd (ASX: TLS) and Coles Group Ltd (ASX: COL), the Australian share market also allows you to invest in the property market.

This is achieved through real estate investment trusts (REIT), which are companies that own and operate property assets. They also usually offer investors a nice source of passive income in the form of dividends.

Two Australian REITS that have been rated as buys recently are listed below. Here's what you need to know about them:

Healthco Healthcare and Wellness REIT (ASX: HCW)

The first Australian REIT to look at is the Healthco Healthcare and Wellness REIT. It invests in the companies with exposure to the healthcare and wellness markets.

Bell Potter is very positive on the company, noting that it has an addressable market worth $218 billion. This gives it plenty of growth opportunities over the next decade and beyond:

HCW has underperformed the REIT sector last 3 months (-10% vs. +22% XPJ) following bond yield reversion and is attractively priced at 20% discount to NTA (but only REIT to record flat to positive valuation movement at 1H24) with double digit 3 year EPS CAGR given high relative sector debt hedging and ability to grow its $1bn development pipeline via attractive YoC spread to marginal cost of debt. Longer term, HCW has significant scope for growth with an estimated $218 billion addressable market where an ageing and growing population should underpin long-term sector demand.

As for dividends, Bell Potter is forecasting dividends per share of 8 cents in FY 2024 and then 8.3 cents in FY 2025. Based on its current share price of $1.13, this would mean yields of 7.1% and 7.3%, respectively.

Bell Potter has a buy rating and $1.50 price target on its shares.

HomeCo Daily Needs REIT (ASX: HDN)

Analysts at Morgans think that this daily needs focused property company could be an Australian REIT to buy.

It feels that the company is well-placed to benefit from the click and collect trend. It said:

HDN's $4.7bn portfolio is focused on daily needs assets (Large Format Retail; Neighbourhood; and Health & Services) across +50 properties with the top 3 tenants Bunnings, Coles and Woolworths. 70% of leases are fixed; 21% linked to CPI; and 9% based on supermarket turnover. The portfolio has resilient cashflows and continues to be a beneficiary of accelerating click & collect trends. +80% of tenants are national and ~75% of tenants offer click & collect reinforcing the importance of assets being able to support 'last mile logistics'. Sites are also in strategic locations with strong population growth (+80% metro). HDN offers an attractive distribution yield and the development pipeline provides growth opportunities.

In respect to income, the broker is forecasting dividends per share of 8 cents in FY 2024 and then 9 cents in FY 2025. Based on the current HomeCo Daily Needs share price of $1.23, this will mean yields of 6.5% and 7.3%, respectively.

Morgans has an add rating and $1.37 price target on its shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group and Telstra Group. The Motley Fool Australia has recommended HomeCo Daily Needs REIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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